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IW been doing seed-stage investing since the late 1990s - i.e. since before seed investing was trendy. As a result, they know a lot of people who have ended up in larger tech companies (through acquisition or otherwise), and they have a lot of examples of smart and dumb decisions that the entrepreneurs made along the way. Regardless of whether or not they fund you, you should try to use them as a sounding board and networking resource to access other entrepreneurs, employees, investors and potential customers. Here's a couple examples from my own experience -- through IW, our marketing person was introduced to a bunch of other creative/scrappy startup marketers, and I've used IW to help me with hiring and structuring appropriate compensation plans for my employees. I also used an IW connection (the CEO of a former IW portfolio company that was acquired by a large west-coast company) to get an intro to the strategic investor that I was targeting, which ultimately resulted in getting a term sheet from them. But you have to be proactive about getting the assistance. Look at their website and figure out which of the 100+ companies might have useful advice/connections for you, and then ask IW for the specific intros. Yes, the money from IW is nice (we got $200K when we weren't quite ready for a larger VC round), and the fact that they use convertible debt means that you don't have to argue about valuation yet. But an angel round could have provided us with the same amount of money -- the bigger value for us came from tapping into IW's network, and I'm pretty sure there aren't any angels in Pittsburgh with as big of a network as IW's.

I am always amused to see "Very Small Private VC founded in N/A
Pittsburgh" in TheFunded.com description of Innovation Works. IW is anything but a private venture capitalist. They are funded primarily by the state of Pennsylvania's Ben Franklin bureaucracy and have altruistic objectives to hand out money and create jobs - not exactly a venture capitalist model. Investors they are not!

Lately IW employees (Lunak, Demmler, Jen, etc) launched an email campaign to beg for letters to be written to Pennsylvania state legislators to drum up support for maintaining IW funding. The letters explicitly state

I laughed when I read that and am not alone in finding great humor in such a disingenuous statement. Of course this campaign is about funding Innovation Works!

IW employees would have tremendous difficulty fending for themselves in the real world of entrepreneurship without the excessive pay and support they receive from the state. Few, if any, would survive in the world they profess to support.

am the CEO of a tech startup that is funded by Innovation Works. We have had a very good experience with IW, with our executive-in-resident, Randy Eager, with other executive-in-residents and with Rich Lunak. I know IW has had issues in the past under different leadership but that was then and this is now. My experience has been positive and IW has made us a better company. Randy has been in the trenches of leading a startup and knows what it is like to raise money, deal with technical issues, handle long term sales and deal with university licenses, which is an art in and of itself. Randy helped us find a much needed executive that was familiar with our business, had extensive startup experience and was capable of taking over sales for a yet to be finished product. Frank is a straight shooter who has seen many companies succeed and many fail. He understands what investors are looking for and has help guide our milestones to ensure that we are able to raise money in the near future. Chet Fisher also has extensive experience as an executive and as one who has lead investors. Chet was able to provide critical brain-storming very early in our development to get our products pointed in the right direction. Jim Jen is highly intelligent and has provided insightful comments during our presentations. There are many more at IW that I should mention but I'm out of time and my main point here is that IW has a solid group of people who have experience and are making a positive impact on their companies. We will continue to seek their assistance and guidance.

Would we pitch them again, if we knew that they wouldn't fund us" I would have as I learned a great deal in the process. Bombing a pitch is never fun, but better to do it at IW and get feedback than to do it in front of investors. I have attended numerous meetings at IW and have learned something each time. (Even before we were funded.) On the down side, the IW due diligence process was a significant hassle but it was only after we were told we would get funding. I've been told it is more of a later stage VC-level due diligence and going through it early is trivial compared to not having things in order later.

I heard that the new CEO is much better to deal with and we did not meet with Mike Morneault so cannot comment. Previous comments about Frank Demmler are spot on. Same can apply to Randy Eager, and a few other people. They apparently are looking for very green companies that believe they can add some kind of value, and if not will take a very defensive attitude especially when its clear they neither dont have the knowledge or didnt even bother to review information forwarded to them by companies. They appear very political and hearing from other (funded) companies that the time needed to process something through them certainly isnt worth the amount they provide, which has strings attached. Companies considering them should consult with companies they have funded but be sure to get frank comments..some may be worried to do so (again, they fund smaller more helpless companies that may feel nervous about discussing things..).

We wont bother meeting with them in the future, and certainly wont refer them. Good luck to Rich Lunak..hopefully he can bring in people that can really improve this organization.

We were told that direct meetings with him would be much more productive. Hopefully, he can turn that mess around. The city needs it. Also, they have experienced a lot of turnover so perhaps morale isnt so high.

The company I co-founded has closed multiple rounds with Innovation Works based on us continuing to make progress. I also completely disagree with the characterization of Frank and his team. We work with Jim Jen and he has been extremely value add over the life of our firm. Jim does have operating experience with multiple Silicon Valley start-ups as a product manager. This has given him good perspective on the evolution of products at the early stage.

In addition, I've found Matt Harbaugh to be a great resource for us. He has helped us work through some important financial modeling exercises and been an excellent source of national VC leads and product feedback.

I think a more accurate assessment of Innovation Works would be that they are simply an early stage fund. They do have a focus on the Pittsburgh region, so they have a term that taxes you very heavily if you try to leave the region. So if you're going to leave, think hard before taking their money.

However, they are helpful and relatively aggressive about supporting those companies that are part of the region.

One other thing to keep in mind if you do end up working with Innovation Works. They have a fantastic MBA internship program for their portfolio companies. They cover 2/3 of the cost and do a great job helping you ID good candidates. We've used this program for multiple summers and it's been extremely valuable.

The fund is financed primarily through state funds and are very limited to how much they can invest. They propose investments up to $500k or more if the opportunity is right. This is incorrect and a misrespresentation. The firm has repeatedly only given $100k, sets milestones for additional funds, and never follows through on the remainder of funds.

I found Frank Demler to be a tool. He walked into several of our meetings unprepared, making very general statements, and overly critical on our performance, even though we met our milestones. Plus he reminds me too much of the guy who sell Quaker Oats and Life Insurance minus the charisma.

It is very difficult to have respect and take advice from Frank and others on the team when they have never been entrepreneurs and/or have a strong IRR.